How do you manage your risk??

[skiracer]

I have some experience using math expectancy spreadsheets to input my # of winning/losing trades, avg win and avg loss. For me this was somewhat pointless. My trading was what it was. I tried to keep losses small and let my winners ride a bit more. I did find it helpful and informative to review my trades. I've mentioned this before here, but I found it interesting that I made 20% in a $10,000 trading account with only 20% winning trades. I lost 10% of the time, and I got out about even in 70% of my trades. I didn't count a 0.05% gain as a win. A winning trade was about 3-5% with an occasional 10-15% gain. A losing trade was about 1-3% and sometimes 4-5%. This was back when I first started trading in early 2010. When the market became more volatile I would use smaller position sizes. If you want to have a risk reward of 1:3, it doesn't mean you have to take every win at 3% and every loss at 1%. When I think I'm wrong, I get out quickly even if my maximum risk hasn't been hit. In my experience, this has been the holy grail.

I dont think anything has to be locked in stone except your stop losses which if you dont have a preset max limit that you exit your losses at you will definitely go broke. I look at the math expectancy numbers as a way to see if my money management numbers and my risk/reward numbers are working out for the number of trades that I make. Sometimes they fall where I want to see them and other times they dont. being aware of the equations and being able to adjust your trading is the key to being successful. if you dont know or understand all of this you are definitely operating at a disadvantage. how you apply it will have a bearing on your results.